FutureStrategiesforVoLTE Deployment

VoLTEreducescostbutwillbedifficulttomonetize
ReferenceCode:TE011001193 PublicationDate:19Feb2013 Author:JeremyGreen,NicoleMcCormick,SaraKaufman

SUMMARY
Inanutshell
MobileoperatorspreparingtorolloutLTEdontneedtohurrytodeployvoiceoverLTE(VoLTE).There arestillserviceandsupplyissuestobeworkedout,andtime(andtheeffortofothers)willsolvemostof this.Inthemeantime,VoLTEwontdeliveranycompellingservices,revenueopportunities,orbusiness prospects.WhileVoLTEwillenablenetworkefficiencyandcostsavingsinthelongterm,operators shouldcontinuetofocusondataservicesforthetimebeing.

Ovumview
Formostoperators,theeventualdeploymentofLTEisaforegoneconclusion.Whileissuesremain arounddeterminingexactlywhentolaunchLTE,decidingnottorolloutthetechnologyatallisaniche positionthatfewoperatorsincompetitivemarketswilltake.Asimilarlogicappliestoprovidingvoice servicesonLTE.Beingadataonlyoperatororprovidingcustomerswithtelephonyviaanoverthetop (OTT)service(eitherinhouseoronaBYObasis)isagainanichepositionthatfewoperatorswilltake. Operatorsareneitherwillingnorabletoavoidprovidingtelephonyservicesasdoingsocarriestoo manycommercialrisksandwillnotbepermittedbyregulators. Whiletherearesomequestionsabouthowtoprovidevoiceservicesduringaninterimperiodwhenthe LTEnetworksitsalongsidelegacy3Gand2Gnetworks,thereisageneralconsensusthattheultimate destinationisasolutionbasedonIPmultimediasubsystem(IMS)thathasbeendesignatedasVoLTE voiceoverLTE. However,thekeyquestionforoperatorsisoneoftiming.AswithLTE,someoperatorswillfindreasons tolaunchVoLTEservicesearly.ThedriversofanearlyVoLTEdeploymentinclude: networkefficiency

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 VoLTEeliminatingtheneedforaseparatevoicenetwork,andthepromiseofspectralefficiency furtherreducingthecostoftransportingvoice qualitybenefits,especiallyintermsofcallsetuptimecomparedtoUMTS thepossibilityofnewservicessuchasHDvoice,simultaneousvoiceanddatausage,andRich CommunicationSuite(RCS)offerings. However,otheroperatorswillfindreasonstohangbackandnotgetaheadofthepack.Theyciteahost ofserviceparityissues,includingsupportforemergencycallsandincallhandoverbetweenLTEand othernetworks.Theyalsopointtoproblemswithdevices,includingtheinsufficientavailabilityofdevices thatsupportVoLTEandunresolvedissuesaboutdeviceperformance(mostnotablybatterydrain). Ovumprefersthesecondstrategy,believingthatitwillbethesecondmousethatgetsthecheeserather thantheearlybirdthatgetstheworm.Webelievethattheopportunitytogainfirstmoveradvantagein theVoLTEspaceisoutweighedbythepotentialteethingproblemsthatthetechnologycouldface.As witheveryotherlaunchofanewnetworktechnology,therewillbeissuesassociatedwiththeavailability ofsuitabledevices.Theserviceparityissues,andinparticularthequestionsaroundhandover,also seemtobesubstantial. TheservicebenefitsofVoLTEalsoappeartobetenuous.EvenifRCSserviceswereasurefirewinner (andthisisbynomeansanestablishedcertainty),theirdeploymentislargelyunrelatedtoLTE,asthe fewcommercialdeploymentstodatelargelydemonstrate.ItisasimilarsituationwithHDvoice,which canbedeployedonbothLTEandnonLTEnetworks. NoristhereastraightforwardrelationshipbetweenVoLTEandnewchargingmodelsforvoice.Although somemobileoperatorsarebeginningtoeitherfeeloranticipatepressurefromOTTVoIPservices, VoLTEinitselfneitherfacilitatesnorrequiresanewkindofchargingmodel.Itisdesignedtosupportall oftherecording,charging,andbillingmechanismsthatapplyintraditionaltelephony.Operatorscan choosetoimplementadifferentsetofbillingprinciples(includingunlimitedvoice),buttheycandothis independentlyofLTE. Forallofthesereasons,ouradvicetooperatorsistostayengagedwithVoLTEbuttonotrushtodeploy thetechnology.Ovumbelievesthatifoperatorscanaffordtowait,theyshould.Operatorsthatcant affordtowaitshoulddowhattheycantoavoidanyproblemsbymakingdetailedplansfordevice acquisitionandworkaroundsforanyserviceparityshortcomings.Operatorsshouldalsocontinuetosell LTEonitsrealbenefitsintermsofdataservicesratherthanontheshakypotentialbenefitsprovidedby voiceservices.TherealbenefitofofferingvoiceonaLTEnetworkisthatitallowsformoreefficient operationandthusreducedopex,butthatisnotsomethingthatcustomerswantorneedtohearabout.

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DRIVERSANDBARRIERSTOEARLYVOLTEDEPLOYMENT
Overview
Intheshortterm,operatorsneedtodecidewhethertoimplementVoLTEnoworwaituntiltheusual teethingproblemsassociatedwithbeingafirstmover,suchasalackofdeviceavailability,areresolved. Wefinditdifficulttomakeacompellingargumentforthevastmajorityofoperatorstobecomefirst moversonVoLTEotherthanforthefactthattheIPbasedvoiceplatformisdesignedtobemore efficientandwillthereforebemorecosteffectiveforoperators.Forexample,voiceoveraspectrally efficientLTEnetworkwithanallIPcorewillreducethecostoftransportingvoice.VoLTE,which eliminatestheneedforaseparatevoicenetwork,isaprerequisiteforthis. ItisarguedbysuppliersandsomeoperatorsthatVoLTEwillpavethewayfornewvoiceservices,such assimultaneousvoiceandvideo,andenhanceexistingservices,suchasvideochat.However,these serviceswillhavetocompetewithsimilarofferingsfromOTTplayers,manyofwhichwillbefree.Inthis context,itwillbedifficultforoperatorstomonetizeVoLTEvalueaddedservices(VASs). AlthoughstandardsandtheroadmapforsupportingvoicetelephonyoverLTEarenowwelldefined, manyoperatorsarestillhesitantaboutimplementingVoLTEintheshortterm.Theseoperatorswant voicetelephonythatisfullyinteroperablewithlegacyservicesandthatwillhavenodeficitinquality comparedtothoseservices.Currently,operatorsarecontinuingtoconductVoLTEtrialsforquality assurancetestingratherthanrushinginwithacommercialVoLTEoffering. Sofar,fouroperatorshavelaunchedcommercialVoLTEservices.TheseincludeallthreeSouthKorean mobilenetworkoperators(MNOs)SKTelecom(SKT),KT,andLGU+andregionalUSoperator MetroPCS.InSouthKorea,thethreeoperatorsbelievedthatofferingVoLTEserviceswouldprovide themwithdifferentiationinthemarket.However,thiswasshortlived,withbothSKTandLGU+ launchingVoLTEservicesinAugust2012andKTfollowinginOctober2012.MetroPCSsearlymoveto VoLTEhashadmoresubstanceandwillallowtheoperatortofreeupCDMAspectrumforthe expansionofitsLTEnetwork.Ovumdoesnotexpectthatmanymoreoperatorswilllaunchcommercial VoLTEservicesuntil2014or2015.

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Figure1:ProsandconsofearlyVoLTEdeployment

Source:Ovum

Driversdemandside
Qualitybenefits ThemainqualitydifferentiatorsofVoLTEareimprovedcallsetuptimesandbetteraudioservices comparedtoUMTS.Theseprovideabetteruserexperienceforvoicecustomers. SouthKoreanoperatorsclaimthatVoLTEcallconnectiontimesare20timesfasterthanconnections overUMTS.WithVoLTE,thecallconnectiontimeis0.252.5seconds,whiletheaverageconnection timefor3Gvoicecallsisfiveseconds.Inlaymansterms,thereceivingpartyofaVoLTEcallcan answerthecallalmostimmediatelyafterthepersonmakingthecallpressesthedialbutton. AnotherkeydifferentiatorofVoLTEisthatithasbetteraudioqualitythan3G.Thisisbecausehigh qualityaudiocodecshandle2.2timesmorebandwidth,whichreportedlyimprovescallqualitybyupto 40%.SouthKoreanoperatorLGU+usesadaptivemultiratewidebandvoicecodecs,whichcovera 50MHz7GHzrange.Inaddition,theoperatorhasdeployedQoSclassidentifiertoensureconsistently goodvoicequality,evenduringperiodsofnetworkcongestion.

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Possibilityofnewservices VoLTEopensuptheprospectofoperatorsofferingnewvoiceservices,suchassimultaneousvoiceand video,whichwillhelptokeepvoicerelevanttoconsumers.However,itisnotentirelyclearwhy operatorsexpectVoLTEtosucceedinthisareawhentheyhavethusfarbeenunabletodevelop compellingversionsoftheseservices. Wedonotbelievethattheprospectofofferingnewserviceswillbeanimportantdemandsidedriver (i.e.anewrevenuesource)forlaunchingVoLTE.Infact,wethinkthatitwillbedifficultforoperatorsto makeanymoneyfromservicesofferedoverVoLTE. FirsttomarketandOTTadvantage SomeoperatorshavejustifiedtheearlycommercializationofVoLTEforcompetitivereasons.However, thecompetitiveadvantageprovidedbybeingaVoLTEfirstmovercouldbeshortlived.Forexample, leadingSouthKoreanoperatorSKTidentifiedthatbeingthefirsttomarketwithVoLTEwouldbe strategicallyimportantinthehighlycompetitiveSouthKoreanmarket.Italsobelievedthatbeingthefirst tolaunchVoLTEserviceswasnecessarytomaintainitsimageasatechnologyleader.WhileSKTwas thefirstoperatorinSouthKoreatolaunchVoLTEservices,thesmallestoperatorinthemarket,LGU+, launcheditsownVoLTEserviceshortlyafterwards,negatinganyfirstmoveradvantageasidefromthe spuriousmarketingclaimofbeingfirst. InmarketswhereOTTmessagingplatformshavehadasignificantimpact,VoLTEcouldprovetobea valuablecompetitiveweapon.However,wewouldbesurprisedifoperatorsofferedmorecompelling servicesthroughVoLTEthanthoseprovidedbyOTTmessagingplayers.

Driverssupplyside
Lowercostandbetterspectralefficiency VoLTEisamorecosteffectivemeansofprovidingvoiceservicescomparedtolegacycircuitswitched networks.Inaddition,VoLTEwillreducefuturecostsforoperatorsasiteliminatestheneedfora separatevoicenetworkalongsideadatacentricLTEnetwork. Ovumbelievesthatthelowercostofoperationpercustomershouldbethemaindriveroftheearly adoptionofVoLTEservices.Manyoperatorsdontcurrentlyplaceenoughemphasisonreducingopex, anddeployingVoLTEwillhelpwiththis.However,theimmaturityoftheVoLTEecosystemmeansthat themajorityofoperatorswilldeferdeployingVoLTEintheshortterm,despiteitscostadvantages. RefarmingexistingspectrumforLTE OperatorsviewVoLTEasafirststeptowardsfreeingupspectrumthatcanberefarmedforLTEonceit isnolongerrequiredforvoice.

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ThelaunchofVoLTEserviceswillallowUSoperatorMetroPCS,whichistheonlyoperatortohave deployedthetechnologyintheUS,tofreeupCDMAspectrumforLTE.IntheUS,intenseLTE competitionamongallthemajoroperatorsandpressuretorefarmexistingspectrumforLTEisdrivinga commitmentbymanyoperators,includingVerizonWirelessandAT&T,torolloutVoLTEinthenext12 18months. ForGSMoperatorselsewhere,especiallythosethathavebeenallocatednewspectrumforLTEinthe 2.5GHzor700MHzbands,thereislessneedtoadoptVoLTEforcapacityreasons.

Barriersdemandside
Monetizationisdifficult Currently,VoLTEVASsarelimited.Forexample,besidesofferinghighqualitycalls,SKTsonlyother VoLTEVASallowsuserstoswitchbetweenvoiceandvideoduringacall.OtherVASswillbeadded shortly,includingtheabilitytosharevideofilesduringacall.WhileadditionalVASswillemergeinthe future,themaindifficultyfacingoperatorswillbemonetizingthem,especiallywhenOTTplayersoffer similarservicesforfree. RCSdoesnotneedVoLTE InOctober2012,MetroPCSlaunchedRichCommunicationSuite(RCS)5.0servicesalongsideVoLTE undertheGSMsJoynbrand,whichisastandardforcombiningandintegratingthefunctionalityof voice,messaging,andotherdataservices(suchasvideo)underoneumbrella.MetroPCSsintroduction ofRCSmayappeartosignalthedawnofanewservicesmarket,butinfact,thecompanysRCSlaunch islimitedandlacklusterintermsofthecustomersittouches,thenewservicesitpromises,andthe revenuesitcangenerate. MetroPCSchosetolaunchRCSononlyonesmartphonetheSamsungGalaxyAcclaim4G althoughtheoperatorclaimedthatitwouldintroduce10RCScapabledevicesbytheendof2012.In addition,MetroPCSsLTEnetworkcoverageofjust14UScitiesisasignificantimpedimenttoitgaining anyrealtractioninthemarket.Whencombinedwiththefactthatithaslessthan10millionofthe367 millionUSmobilesubscribers,thesefactorsmeanthatthepotentialcustomerbaseforRCSisonlya tinyfractionofthetotalmarket. However,thebiggestshortcomingofMetroPCSsRCSlaunchistheunderwhelmingselectionof capabilitiesandfeaturesthatitenablesforcustomers.Oneofthemostdesirableandpromotedfeatures ofthenewRCSservicesvideocallingisonlyavailableoverWiFi.Inaddition,VoLTE,whichthe operatorhastoutedasakeyenablerofRCS,seemstohavenomaterialrolesinceitisbeingofferedon adifferenthandset. SouthKoreasthreeMNOswereallscheduledtolaunchinteroperableRCSservicesinNovember2012. However,ifthistookplace,itwasdonewithlittlefanfarecomparedtotheattentionthatsurroundedthe

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declarationofintent.WhileitisstillearlydaysforRCS,webelievethattheservicewillmoreofan opportunityforoperatorsinmarketswhereOTTmessaging/VoIPplatformshavehadlimitedsuccess. AsdemonstratedbyMetroPCSslaunch,thedeploymentofRCSislargelyunrelatedtoLTE.AsRCS doesnotrequireIMS,theservicescanbeofferedbyoperatorswithexisting3G/3.5Gnetworks. IMSlacking VoLTEhasbecomeamediumtermambitionformanyoperatorsastheyarestillrollingouttherequired IMScapabilityintheirnetworks.IMSinvolvesasubstantialfinancialcommitmentthathasbeenanissue forsomeoperators,especiallythoseinemergingmarkets.IMSdeploymentsarealsotypicallyslowand thishashinderedtherapidrolloutofVoLTEservices.OnceIMSinvestmentshavebeenmade,afurther challengeforoperatorswillbetherealignmentoftheiroperationalandbusinesssupportsystemsforthe newIPenvironment.ThesefactorshighlightjusthowcomplexandtimeconsumingtherolloutofIMSis foroperators. CSFBworkswellenoughfornow SomeLTEoperatorsbelievethatcircuitswitchedfallback(CSFB)isagoodinterimsolutionthatwill providereliablecoverageandvoiceperformancewhiletheymonitorthedevelopmentoftheVoLTE ecosystemandlaunchesinothermarkets.Severaloperatorshavestatedthattheyhavebeen pleasantlysurprisedbytheperformanceofCSFB,whichhasenabledthemtodelaythecommercial rolloutofVoLTEwhiletheywaitforasufficientdeviceecosystemtoemerge.However,someoperators thathavedeployedCSFBhaveamuchlessfavorableopinionofthesolution. Roamingisashorttermchallenge Accordingtomanyoperators,providingVoLTEservicestoroamingcustomerswillonlybecomeareality onceVoLTEbecomeswidelyavailableinboththenetworkandterminals.Ultimately,theroaming opportunitydependsonoperatorsmutualIMSdeployments. Firstmovershavenotrushedtosignroamingagreements,preferringtowaitfortherestofthe internationalcommunitytocatchupwithVoLTEbeforeaddingroamingtothealreadycomplex implementation.Mostoperatorsexpecttocontinuetousethesamemechanismsthattheyusefor circuitswitchedtelephonytosupportvoiceroamingonLTE.

Barrierssupplyside
Lackofdevicesandplatforms ThelackofsuitabledevicesisoneofthebiggestbarrierstotheearlyadoptionofVoLTE,andOvum expectsthatitwilltakeuntilatleast2014forVoLTEtobecomeamainstreamoptioninnewLTE smartphones.AsshowninFigure2,therearecurrentlyonlythreehandsetsthatsupportVoLTE.

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MetroPCSannouncedplanstointroducethreeVoLTEcapablehandsetsin2012,buttodatehas launchedjustone,theLGConnect4G.TheonlyVoLTEcompatiblehandsetavailablefromSKTis Samsung'sGalaxySIIIsmartphone.ExistingGalaxySIIIdevicesbecameVoLTEcapableviaa softwareupgradeattheendofAugust2012.LGU+launcheditsVoLTEservicewithtwoVoLTEenabled smartphones:LG'sOptimusIIandtheGalaxySIII.Upgradesforexistingmodelsofthesedeviceswere alsomadeavailableinAugust2012. Figure2:VoLTEhandsets(asofSeptember2012)

Source:Ovum

Aswellasalackofdevices,operatorshavestatedthatuntilnetworkinfrastructureforVoLTEwas available,voiceserviceswouldhavetoresideonexistingnetworks.Thisisaparticularconcernfor Europeanoperators. Lackofoperationalsolutions Whendiscussingactivecallhandoff,CSFBisnotrelevantasanorthogonaltechniqueforVoLTE becauseitforcesadevicetotakeormakecallsona2G/3GnetworkinsteadofLTE.Assuch,ifCSFBis deployed,thereisnoLTEto3Ghandoffforanactivecall. Withsingleradiodevices,thehandofftechniqueisreferredtoassingleradiovoicecallcontinuity (SRVCC),whichisinitiatedfromtheLTEnetworkwhentheLTEsignaldeteriorates.TheSRVCC enhancementstandardwhichallowscomparablelegacycircuitswitchedhandoverperformance between2G/3GnetworksandLTEnetworkswascompletedin3GPPsRelease10.Analternativefor

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dualradiodevicesistousevoicecallcontinuity(VCC).Accordingtosomeoperators,thelackof SRVCCsolutionshasbeenanimpedimenttotheearlyadoptionofVoLTE. NoincallhandoverintheUS IntheUS,currentVoLTEequippeddevicesarenotSRVCCorVCCenabledandthusdonotsupport incallhandoverbetweenVoLTEandCSFB.Therefore,acallisdroppedifausermovesoutsideofthe coverageofaLTEbasestation.AsLTEnetworkcoverageexpands,incallhandoverwillbecomelessof anissueforoperators. Infact,SRVCCandVCCareonlyrequiredwherethereisnotuniversalLTEcoverage.InSouthKorea, SRVCCsimmaturityhasnotbeenanissueasoperatorsdonotrequirehandofffromLTEto3Gsince LTEnetworksaredeployednationwide.VerizonsplantolaunchVoLTEservicesonceithascompleted therolloutofitsnationwideLTEnetworkinearly2014supportsthenotionthatoperatorscanbypassthe needtodevelopSRVCC. ServiceparityforVoLTEisrequired AsshowninFigure3,maintainingfullserviceparitywithcircuitswitchedtelephonyishighlycomplex.In additiontopersontopersoncalling,circuitswitchedtelephonyisusedforawiderangeofcommercial andnoncommercialVASs.Neithersessioninitiationprotocol(SIP)norIMSsupportalloftheseoutof thebox,meaningthatamorecomplexarchitectureofdedicatedserversandinterfacesisrequired. TheIMScomplianttelephonyapplicationserversupports: voiceandvideocalls theIPmultimediaservicecontrol(ISC)andMainterfacesper3GPP24.229 themultimediatelephonyservice(MMTel)standardper3GPP24.6xxseriesspecifications IMSprofileforvoiceasspecifiedinGSMAIR.92andforvideoasspecifiedinIR.94 Thecontrolofmediaresourcefunction(CMRF)formediaresourcefunctioncontroller/mediaresource functionprocesser(MRFC/MRFP)functionalitysupportstones,announcements,conferencing, transcoding,andpromptandcollect(SIP,MSMLRFC5707,andVoiceXML).

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Figure3:VoLTEarchitecture

Source:Mavenir

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AlongsideQoS,batterylifeisaconcern Maintainingagoodcustomerexperienceisanimportantconsiderationforoperatorswhenmakingthe transitiontoVoLTE.OperatorshaveexpressedconcernsaboutcallqualitycontinuitywithVoLTEand thebatterylifeofdevicesgiventhattheearlyCSFBexperiencefromtheUSshowedthatbatterylife wasaproblem.OperatorswouldprefertotestVoLTEwithscaleonboththenetworkandhandset beforeundergoinganearlycommerciallaunchandpotentiallyjeopardizingcustomerexperience.We expectthatmanyoperatorswilltakethisapproach,especiallythosethatarepositionedatthepremium endofthemarket. Deviceslacksupportforemergencycalling VoLTEdevicesofferedbyUMTS3GoperatorsintheUS,suchasAT&TandTMobile,willnotsupport emergencycallingasitcurrentlyrequiresacircuitswitchedconnection.CDMAoperatorshavea solutiontothisproblem,whichispartlywhyVerizonhasamoreaggressiveVoLTElaunchtimetable thanAT&T.ThelackofemergencycallingsupportisanespeciallybigissueintheUS,whereatelcos operatorlicenseisdependentonmeetingstrictnationalE911emergencyservicelocation requirements. Ina2011responsetotheFederalCommunicationsCommissions(FCC)proposedrulemakingforVoIP services,MetroPCSarguedthatcommercialmobileradioservice(CMRS)operatorsshouldbeallowed tousetheirexistingcircuitswitchednetworksasanE911solutionforVoLTE.However,oneofthe concernswiththismethodisthatVoLTEandCMRSservicesoftenusedifferentnetworkarchitecture thatcouldresultincoverageholeswhereVoLTEisavailablebutthecircuitswitchednetworkisnot.In thisscenario,theCSFBsolutionwouldnotmeetminimumFCCE911requirementsandwouldtherefore notbeaviablesolution. MetroPCSandotheroperatorshavearguedthatalackofclarityintheregulationofnewtechnologies suchasVoLTEshouldnotinhibittheirdevelopment.Theoperatorsfurtherarguethattheobjectiveand purposeofregulationshouldbetoprovideacleartargetforoperatorstomeet,nottodefinehowto achieveit.AlthoughtheFCChasyettomakeanofficialrulingonthisissue,USoperatorsseemtohave persuadedtheregulatortotakeanagnosticpositiononthemethodsusedtoprovideE911aslongas anoperatorcanprovideequivalentcoverage. Lackofinterconnection Currently,operatorsdonotviewIPinterconnectionasamajorpriority.Ultimately,thelongtermplanwill beforoperatorstouseSIPforinterconnectionratherthantraditionalsignalingsystem7(SS7) interconnectioninterfaces. MostoperatorsexpectthatSS7signalingwillsupportinitialinterconnectforVoLTE.Oneoperatorhas statedthatitplanstoworkwithotheroperatorsonIPinterconnectsolutionsastheneedreachescritical mass.

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OperatorsaredelayingtheirSIPinvestmentsastheydonotprovidesignificantadditionalbenefitsuntil scaleisanissue.ThisreinforcesouroverallinterpretationthatoperatorsarefocusingonusingVoLTEto supportabasictelephonyserviceratherthanlookingtodevelopnewservicesorbusinessmodels. Focusisoncoverage AnotherreasonwhyoperatorsaredelayingVoLTElaunchesisbecausetheyarepreoccupiedwith expandingnetworkcoverage.Asnetworkreachcontinuestobealeadingdifferentiatoramong operators,itisnotsurprisingthatVoLTEisviewedasamoredistantcommercialreality. Forsomeoperators,thefocusremainsonexpanding3Gnetworkreach,whileforothersthegoalisto ensurethatLTEcoverageisnationalbeforelaunchingVoLTEtoavoidincallhandoverandservice qualityissues.

THECURRENTSTATEOFVOLTEDEPLOYMENTS
AsiaPacific
AnumberofdevelopedmarketoperatorsinAsiaPacific,mostnotablyinSouthKorea,seeVoLTEasa waytopositionthemselvesastechnologyleadersandgainfirsttomarketmarketingprestige.South Koreaalsohasaproactivevendorcommunity,whichmayhavehelpedtodriveoperatorinterestinthe technology.However,JapaneseoperatorshavenotrushedtodeployVoLTE.Currently,leading JapaneseoperatorNTTDoCoMoisfocusingonincreasingitsLTEcoverageandhasstruggledtojustify aVoLTEdeployment.OvumexpectsthatNTTDoCoMowillrolloutVoLTEservicesin2013. OtheroperatorshaveoptedtotakeacautiousapproachtoVoLTEdeployment.Theirviewsaresummed upinTable1.TheseoperatorsaretestingVoLTEorplantostarttrialssoon,butdonotseeits commercializationasurgent.CSLsCTO,ChristianDaigneault,toldarecentconferencethathedoes notseeVoLTEasadifferentiator.CSLcurrentlyoffersHDvoicefor3GandCSFBforLTE.Daigneault statedthatVoLTEispurelyacapacityissueforCSL,notingthatconsumershavenotexpressedany concernoverthequalityofCSFB.CSLbelievesthatanoperatorsreadinesstorefarm3Gspectrumfor LTEwillprovidetheincentiveforthedeploymentofVoLTEservices. AnotheroperatorinthiscategorystatedthathavingafoundationIMScapabilitydevelopedacrossits fixedandmobilenetworkstookpriorityoverVoLTE.Theoperatorsaidthatitwasimportanttosee whetherVoLTEofferedsimilarcallperformanceanddroplevelstocircuitswitchedvoiceservicesbefore deployingthetechnology.Italsostatedthattheoptimizationofthepacketradioanddeviceecosystem neededtomatureandstabilize.Inthemeantime,itsnetworkperformanceusingCSFBisproviding goodandreliablecoverageandperformance. SomeAsiaPacificoperatorsinemergingmarketsviewVoLTEasadistantproposition.InlowARPU markets,thefocuswillbeondeployingIMScapability.

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Table1:VoLTEstatusofselectedoperatorsinAsiaPacific
Operator Launch Reasonfor launch/dela y Maintain technology lead. Services Interconne ction Plansto cooperate withother operators soon. n/a Roaming RCS Price

SKTelecom

August2012

Switching between voiceand videocalls.

Willstart whenother international telcos commerciali zeVoLTE. n/a

November 2012

Same.

Operator1

2014

Device shortage.

n/a

Seenasa newservice forLTE n/a

Difficultto justifytime based charging. n/a

CSL

Labtesting

CSFBisa goodinterim solution. Theneedto refarm3G spectrumis anincentive forVoLTE. Implementin gIMS, device shortage, and monitoring VoLTEscall performance anddrop levels. Waitingfor VoLTEto mature.

Nonew services.

n/a

n/a

Operator2

Testin18 months

No significant changein user behavior expected.

Willwork withother operatorsas interconnecti onreaches critical mass.

Aroamer canusethe 3.5G networkif thehandset isnot VoLTE enabled.

n/a

Willlikely chargefor VoLTEina similarway totraditional telephony.

Operator3

2013or2014

Lookingat HDvoice servicesto maintain ARPU.

Dependson multiple operators IMS capability.

n/a

n/a

Integrating address bookwith voice/video callingisa potential revenue opportunity. Itwillbea challengeto chargefor VoLTE.

Operator4

Dependson timingof IMSrollout

IMSisa substantial financial commitment .Needto realign BSS/OSS systems.

n/a

n/a

n/a

n/a

Source:Ovum

NorthAmerica
BecauseofMetroPCSssmallsize,itsVoLTElaunchisnotlikelytochangeanyofthelargerUS operatorsplansorgiveMetroPCSsubstantiallymoreinfluenceoverthehandsetmanufacturersthatit reliesontomakeitsVoLTEcapabledevices.However,fromacustomerperspective,MetroPCSsearly

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VoLTElaunchreinforcestheoperatorsbrandpositioningasatechnologyandservicesleaderina marketinwhichitisotherwiseovershadowedbyitscompetitors. AsMetroPCSisafractionofthesizeofVerizonandAT&T,itdoesnthavealotofinfluencewith handsetmanufacturers,significantmarketingresourcestopromoteitsVoLTElaunch,orthebrand powertomakeamajorimpactoutsideofitshomeLTEmarkets.Theselimitationshaveforced MetroPCStomoveslowlywhenintroducingVoLTEcapablehandsets,withtheoperatoronlyreleasing onetodate:theLGConnect4G. WhenVerizonintroduceditsnewIMScorein2009,theoperatorappearedtobepositioningitselfasthe VoLTEservicesleaderintheUS.However,VerizonseagernesswithVoLTEhaswanedconsiderably. Initially,theoperatorannouncedplanstocommerciallylaunchVoLTEin2012,butitsubsequently changeditslaunchdatetolate2013tocoincidewiththecompletionofitsLTEnetworkrollout.More recently,Verizonagainpushedbackitslaunchplans,sayingthatitwouldintroduceVoLTEsometimein early2014.Aswithoperatorsinotherregions,buildingitsnationalcoveragefootprinthastakenpriority overdevelopingnewservicesfortheLTEnetwork. AT&T,Sprint,Clearwire,andNetAmericaAlliancehaveallannouncedplanstolaunchVoLTEin2013or 2014.

Europe
EuropeanmobileoperatorsdonotseeVoLTEasashorttermnecessity,withnoneoftheoperatorsthat wehavespokentohavingadetailedplanorafirmtimetableforimplementingthetechnology. Telefonicahasnofirmlaunchdate,vision,orplanforLTEvoiceservices.Theoperatoralsohas nodetailedplanastohowtosupportroamingorimplementinterconnect. DeutscheTelekom/TMobileGermanyalsohasnodetailedplansoraspecificdateforatrial. Informalcommentsfromtheoperatorsuggestthatalaunchisatleasttwoyearsaway. Orange/FranceTelecombeganVoLTEtrialsin2012andwillcontinuetoconductthemin2013. However,dataisOrange/FranceTelecomsprioritywhenitcomestoitsLTEnetwork,withthe operatorstatingthatuntilthedevicesandnetworkinfrastructureforVoLTEareavailable,voice servicesforLTEsubscriberswillbeprovidedbythe3Gor2Gnetworks. Onelargeoperator,whichdidnotwanttobeidentified,differedfromtheconsensusinbelieving thatVoLTE,togetherwithRCS,wouldbeaplatformforinnovativeservicesthatwouldcombine communicationswiththesocialsharingofcontent. ThatsofewEuropeanoperatorsarewillingtoparticipateininterviewsabouttheirVoLTEstrategy highlightsjusthowfaroffpracticalcommercialdeploymentsare.

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VOLTESERVICESANDPRICINGMODELS
VoLTEservices
OvumbelievesthatoperatorexpectationsfornewVoLTEservicesareunrealistic.AsshowninFigure4, operatorshaveidentifiedanumberofnewVoLTEservicesandcapabilitiesthattheyexpecttobeable tomonetize. Figure4:ServicesoperatorsexpectVoLTEtoenable

Source:Ovum

AlthoughalloftheseservicescanbesupportedbyVoLTE,thedifficultywillbeinmonetizingthem, especiallywhenOTTplayersoffersimilarservicesforfree.Infact,webelievethatthereislittle incrementalrevenuetobegainedfromHDvoiceservices,inappvideochat,oringamevoiceservices viaVoLTE.OneofthemostcompellingcompetitiveadvantagestohavingVoLTEwhilethecompetition doesnotisVoLTEsabilitytolowerthecostoftransportingvoicetraffic.Thelowercostofthe transportationofvoicetrafficwillallowoperatorstopassonthesavingstotheircustomersinaneffortto competeandenticenewsubscribers.

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AcommonmisconceptionintheindustryisthatRCSisanLTEonlyservice.AlthoughVoLTErequires IMS,RCSdoesnotandcanbeimplementedover3Gor3.5Gnetworks. Amorerealisticexpectationforoperatorsisthatasincreasingnumbersofmultimediadataservicesare enabledbyLTEandIMS,VoLTEwillprovidetheunderlyingtechnologytoincreasecapacity,offerbetter bandwidthandefficiencyforvoiceservices,andreducecosts.Ultimately,operatorscannotgetcarried awaywiththenotionthatVoLTEisanythingmorethanavoiceserviceontheLTEnetwork.

VoLTEpricingmodels
ThereissomeconfusionintheindustryastotheimpactofVoLTEonvoicepricingmodels.Atleastone oftheoperatorsthatwespoketobelievedthatitwouldbedifficulttoimplementtimebasedchargingfor VoLTEcalls,whileothersbelievedthatitwouldbecommerciallyimpracticaltocontinuetochargeinthis wayinthelongterm.However,thesetwoviewpointsconfusetwodifferentissues. ThereisnotechnicalreasonwhyoperatorscannotcontinuetousetimebasedchargingforVoLTEcalls. TheIMSarchitectureonwhichVoLTEisbasedwasspecificallydesignedtocreatecalldetailrecords (CDRs)inexactlythesamewayastraditionalswitches,eventhoughthecallsthemselvesarecarried overapacketbasednetwork.TheseCDRscanbepassedtoabillingsystemandoperatorscanthen implementwhateverbillingschemetheywant.Indeed,operatorsthathavedefinedhowtheywillcharge forVoLTEservicessaythatthisisexactlywhattheyaregoingtodo.SKTandLGU+inSouthKoreaand MetroPCSintheUSallsaythattheywillnottariffVoLTEdifferentlytocircuitswitchedcalls.TheSouth KoreanoperatorsplantousethesamepersecondpricingforVoLTEcalls,butalsoplantooffersome bundlesofvoiceminutestonewVoLTEcustomersaspartofapromotionaloffer.Similarly,MetroPCS planstoofferVoLTEonthesametermsasitsexistingvoiceplans. TheremaybecommercialreasonsforusingadifferentchargingmodelforVoLTE.Forexample, operatorsmayoptforalternativepricingmodelsinanefforttoencouragesubscriberstomigrateto VoLTEservices.AsthecostsavingsgeneratedbyLTEincreasedramaticallywhenanoperatorretires itslegacynetwork,persuadingcustomerstomigratetoLTEquicklyisagoodstrategy. LTEalsoprovidesoperatorswithanopportunityandincentivetorebalancecustomertariffstomore closelyreflectcosts.Intermsofdemandonnetworkcapacity,voicetelephonyisrelativelytrivial,with customersalreadypayingmoreforvoiceonabitforbitbasisthantheydoforotherkindsofusage.If operatorscontinuetochargefortelephonyatanythinglikehistoricrates,thenLTEwillexacerbatethis discrepancy.Thisdoesntmeanthattelephonypricingwillnecessarilybecomeunsustainableas operatorshavenottraditionallypassedonthebenefitsofeverycostreductiontocustomers.However, competitivepressure,bothfrompeersandOTTproviders,mayforcethemtolowertheirvoiceprices. WhileLTEandVoLTEdonotinthemselvesmakeitimperativeforoperatorstomovetonewcharging modelsforvoicecalls,theydomakeiteasierforthemtorespondtootherchallenges. Ovumbelievesthatoperatorsshouldbepreparedtocreatenewkindsofvoicetariffs,buttheyshould movewithcaution.Mostplanswithlargebundlesofvoiceminutesexcludespecifictypesofcalls(such

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asinternationalandroamingcalls)andthusfarthishasbeenacceptabletocustomers.Althoughthe bundlingofinternationalcallshastakenplaceinafewmarkets,thisisstillaminoritypractice.Operators mustbeawarethatitisdifficulttoremonetizesomethingthathasbeguntobeofferedforfree,andvoice callsonLTEwillbenoexception.

APPENDIX
Methodology
OvumconductedseveralinterviewswithoperatorsinAsiaPacific,Europe,andtheUSforthisreport. Duetocommercialsensitivities,themajorityofoperatorspreferredtoremainanonymous.Thereport alsoutilizedOvumsongoingresearchintotheglobaltelecomsindustry.

Furtherreading
GlobalMobileMarketOutlook:201217(TE011001200,February2013) MobileOperatorResponsestoVoIP:TheSixSteps(TE011000931,April2010) TheFutureofVoice(TE011001145,July2012) TheresnoharmintakingaslowroadtoVoLTEdeployment(TE011001196,January2013) USWirelessCarriersAttitudesTowardConsumerVoIPServices(TE011000811,May2009)

Author
JeremyGreen,PrincipalAnalyst,TelcoStrategy jeremy.green@ovum.com SaraKaufman,Analyst,TelcoStrategy sara.kaufman@ovum.com NicoleMcCormick,SeniorAnalyst,TelcoStrategy nicole.mccormick@ovum.com

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OvumConsulting
Wehopethatthisanalysiswillhelpyoumakeinformedandimaginativebusinessdecisions.Ifyouhave furtherrequirements,Ovumsconsultingteammaybeabletohelpyou.Formoreinformationabout Ovumsconsultingcapabilities,pleasecontactusdirectlyatconsulting@ovum.com.

Disclaimer
AllRightsReserved. Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedinanyformby anymeans,electronic,mechanical,photocopying,recording,orotherwise,withoutthepriorpermission ofthepublisher,Ovum(anInformabusiness). Thefactsofthisreportarebelievedtobecorrectatthetimeofpublicationbutcannotbeguaranteed. Pleasenotethatthefindings,conclusions,andrecommendationsthatOvumdeliverswillbebasedon informationgatheredingoodfaithfrombothprimaryandsecondarysources,whoseaccuracyweare notalwaysinapositiontoguarantee.AssuchOvumcanacceptnoliabilitywhateverforactionstaken basedonanyinformationthatmaysubsequentlyprovetobeincorrect.

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